Markets cheer inline RBI Policy announcement; Nifty recaptures 6,200 mark

Snapping five days losing streak, Indian equity benchmarks finally showed jubilation, with frontline indices gaining over one and a half percentage point and recaptured their crucial 6,200 (Nifty) and 20,900 (Sensex) bastions on Tuesday. After a cautious start, markets picked up pace as the Reserve Bank of India (RBI) in its second quarter review of monetary policy FY14, has hiked repo rate by 25 bps, which was on expected lines. Consequently, the reverse repo rate under the LAF stood adjusted to 6.75% and the Bank Rate reduced to 8.75% with immediate effect.

Meanwhile, India’s Apex bank, further unwinding liquidity tightening measures implemented this summer as it struggled to shore up the tumbling rupee, rolled back MSF rate by 25 bps to 8.75% and thus restoring normalcy left Cash Reserve Ratio (CRR) unchanged at 4%. The RBI, however, increased the liquidity provided through term repos of 7-day and 14-day tenor from 0.25% of bank deposits to 0.5% with immediate effect. Sentiments also got some boost after data showing that foreign funds remained net buyers of Indian stocks on October 28, 2013 with foreign institutional investors (FIIs) buying shares worth a net Rs 636.78 crore on Monday.

The northward journey got extended, after European markets opened in the green as investors waited for commentary from the US Federal Reserve after this week's policy meeting, where it is widely expected to keep policy on hold. Moreover, reversing all their early losses, Asian markets ended mixed as investors digested a slew of corporate earnings.

Back home, banking shares remained on buyers’ radar after the RBI reduced the (MSF) rate by 25 bps to 8.75 per cent from 9 per cent. Banks usually tap the MSF rate during acute cash tightness. Moreover, buying in oil and gas too aided the sentiments with stocks of public sector oil marketing companies (OMCs) viz. BPCL, HPCL and IOC edged higher as the Kirit S. Parikh Committee’s report on pricing diesel, domestic LPG, and PDS kerosene is likely to suggest an immediate increase in diesel prices by at least Rs 4 a litre and, thereafter, doubling the current pace of increase in diesel prices to Re1 per month. Additionally, Auto stocks too remained in top gear, mainly driven by stellar Q2 performance of Maruti Suzuki. The company’s stocks rallied over 8% after Maruti reported 3 fold jump in Q2 net profit at Rs 670.23 crore for the quarter as compared to Rs 227.45 crore for the same quarter in the previous year.

The NSE’s 50-share broadly followed index Nifty rose by around one hundred and twenty points to end above its psychological 6,200 level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by over three hundred and fifty points to end above the psychological 20,900 mark.

Broader markets too traded with traction and ended the session with a gain of around a percentage point. The market breadth remained in favour of advances, as there were 1,292 shares on the gaining side against 1,094 shares on the losing side, while 171 shares remained unchanged.

Finally, the BSE Sensex surged by 358.73 points or 1.74%, to settle at 20929.01, while the CNX Nifty gained 119.80 points or 1.96% to settle at 6,220.90.

The BSE Sensex touched a high and a low of 20952.55 and 20493.66, respectively. The BSE Mid cap index gained 1.45% and Small cap index was up by 0.52%.

The top gainers on the Sensex were Maruti Suzuki up 8.19%, ICICI Bank up 6.00%, Tata Steel up 4.24%, Mahindra & Mahindra up 3.77% and SBI up 3.65%, on the flip side BHEL down 0.07%, was the only loser on the index.  On the BSE Sectoral front, Bankex up by 4.35%, Realty up by 2.44%, Auto up by 2.43%, Metal up by 2.12%, and PSU up by 1.70%, were the top gainers, while there were no losers on the sectoral front.

The government has cleared 13 Foreign Direct Investment (FDI) proposals worth Rs 1,258 crore. Foreign investment is considered crucial for economic development of a country and the government has taken several policy decisions to attract foreign investments in various sectors including telecom, tea, pension and petroleum and natural gas.

Meanwhile, India would require around $1 trillion in the 12th five-year plan (2012-2017), to overhaul its infrastructure sector such as airports, ports and highways to boost growth. Further, a rise in FDI will help support the rupee, which depreciated over 15 percent against US dollar in 2013. Despite the government's various efforts to increase foreign investment, FDI during the April-August period of 2013-14 has grown by a marginal 4 percent to $8.46 billion, from $8.16 billion in the first five months of 2012-13, reflecting the need to take more measures to improve the business environment in the country.

Among the major proposals, which have been approved are Shantha Biotechnics (Rs 755 crore), Equitas Holdings (Rs 222.8 crore) and Stork Titanium (Rs 156 crore) among others. Referring to private sector lender Axis Bank’s FDI proposal, finance ministry said that the proposal of Axis Bank, amounting to Rs 6,265.76 crore has been recommended for consideration of the Cabinet Committee on Economic Affairs (CCEA) as the investment involved in the application is above Rs 1,200 crore. The private sector lender Axis Bank had sought the Foreign Investment Promotion Board (FIPB) nod to increase the foreign equity from the existing 49 per cent to 62 percent.

 The CNX Nifty touched a high and low of 6,228.05 and 6,079.20 respectively.

The top gainers on the Nifty were Maruti Suzuki India up by 8.75%, Jaiprakash Associates up by 7.76%, ICICI Bank up by 6.26%, IndusInd Bank up by 5.63% and Axis Bank up by 5.16%. On the other hand, Ranbaxy Laboratories down by 0.90%, ITC down by 0.29%, and Bharti Airtel down by 0.13%, were the only losers.

The European markets were trading in green, France’s CAC 40 was up by 0.28%, Germany’s DAX was up by 0.21%, and United Kingdom’s FTSE 100 was up by 0.47%.

The Asian markets concluded Tuesday’s trade on a mixed note as investors digested a slew of corporate earnings, while sentiment turned cautious ahead of Wednesday’s Federal Reserve policy decision. Japanese retail sales for September rose 3.1% from a year earlier, with the result beating a consensus forecast for a 1.9% rise. The sales at large retailers were up 0.7% from a year earlier. Japanese household spending rose sharply in September, beating expectations, while the unemployment rate ticked slightly lower. Spending by households of two or more people rose a price-adjusted 3.7% from a year earlier, marking the best result in six months. The unemployment rate, meanwhile, slipped to 4.0% from 4.1% in August, though still above the year’s low of 3.8%, hit in July.

Shanghai’s new home market extended its strength for another week as buyers and real estate developers continued to be bullish, which saw more than 357,000 square meters of houses sold last week. The sales of new homes, excluding government-funded affordable housing, rose 8 percent from the previous week to 357,700 square meters during the seven-day period. South Korea’s current account surplus expanded in September from the previous month on trade gains and stronger service industry earnings. The current account, the broadest measure of trade with the rest of the world, showed a surplus of 6.57 billion dollars in September, up from a revised $5.68 billion in August.